Directors’ pay rise a bit rich, sport

There’s rarely a good time to ask shareholders for extra cash for non-executive directors fees, but in the case of auto accessories and leisure retailer
Super Retail Group
it’s timing could not have been worse.

The Brisbane-based retailer is due to hold its annual meeting on Wednesday and will seek shareholder approval to lift the fee pool for non-executive directors by 33 per cent to $800,000 a year.

After $155 million was wiped off the value of their shares last week following a less than enthusiastic response to the $610 million acquisition of Rebel Sport, investors will be in no mood to be generous.

Instead, managing director
Peter Birtles
, chairman
John Skippen
and founder and non-executive director
Reg Rowe
, can expect some tough questions about the purchase price, the outlook for the Rebel business and the $334 million rights issue, which fell as a flat as a pancake.

Birtles and his team tried to reassure investors of the merits of the deal last week. But by the close of trade on Friday, Super Retail shares were trading 2¢ below the rights price of $5.34 and 80¢ below the theoretical ex-rights price of $6.12, giving retail shareholders little incentive to take up the offer.

Underwriters Macquarie Capital and Royal Bank of Scotland and their subunderwriters could be up for $70 million to $100 million by the time the retail offer closes next month, sources said

Super Retail and its advisers, Greenhill Caliburn, are defending the $610 million purchase price, but investment bankers say the retailer has clearly paid too much.

Super Retail is paying a multiple of 7.9 times earnings before interest tax depreciation and amortisation (pre synergies of $10 million), in line with recent deals in the recreational goods market.

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However, sources say the purchase price represents a multiple of 12 times earnings a share – 40 per cent more than Rebel’s valuation had Archer Capital proceeded with an initial public offer. Super Retail was trading at a multiple of 13 times earnings a share before the deal, a premium to its discretionary retail peers. It’s now back to the pack on nine times forward earnings a share.